As keeper of the numbers and the data, the CFO is the voice of reason and realism, but is often the challenger when it comes to a company’s strategic planning. However, Ron Kasner, CFO of iCIMS, a provider of cloud-based talent acquisition solutions in Matawan, NJ, envisions an additional line in the job description: “It’s the CFO’s responsibility to help identify opportunities for growing the business.”

Mr. Kasner spoke on “Strategy and Risk: The CFO’s Role in Driving Opportunity and Protecting the Enterprise” at an invitation-only dinner discussion attended by CFOs from New Jersey–area middle market companies. The event was held recently at Community FoodBank of NJ in Hillsdale, and is part of CFO Studio’s Executive Dinner Series.

“Because CFOs are indeed so data driven,” he said, “we should be delivering information about not just our business, but about the market and whether or not it is ripe for realizing the company’s goals and vision.” He continued, “CFOs should have an understanding of the marketing opportunity and whether the projected results of the business are realistic.”

Mr. Kasner shared his strategic focus on “Presence, Portfolio, Positioning, Pricing, and People” with dinner attendees. “For example, if the current opportunity isn’t large enough, CFOs need to guide the organization to expand its presence —whether geographic, segment, or vertical.” The company will then need to “assess the existing portfolio of products and services to ensure it can serve that newly defined presence.”

Without question, Mr. Kasner added, it’s the CFO’s duty to challenge and “push back” on some parts of even the best strategic plans, “mainly because of our keen attention to risk.” But this is where, he pointed out, strategy and risk go hand-in-hand, and “certain risk factors can and should be used by the CFO to create and help drive company strategy,” thereby opening the doors to new and expanded business.

Use Risk Strategically

There are countless types of risk troubling organizations today, and any CFO worth his or her salt has set up myriad controls to guard against or mitigate these dangers. Whether the risk is in the area of finance, personnel, compliance, or data security (to name a few), “once you’ve assessed the likelihood of the risk occurring and the impact that the risk would have on your business, as well as the ongoing value of the business, you can then determine your risk tolerance,” said Mr. Kasner.

He noted that while some business leaders are born risk-takers and others aren’t, risk tolerance is often based on the size or value of the company: “A start-up with little or no revenue may take on a lot of risk because it has nothing to lose, while a larger, more established firm might err on the side of caution and play things safe.” Alternatively, “larger organizations with a more established infrastructure may be better equipped to mitigate risks, thus lowering the likelihood of occurrence or impact, and thereby enabling the organization to take on what other organizations would otherwise deem a higher risk.”

In either case, “it’s now up to the CFO to ‘manage’ that risk,” said Mr. Kasner. Assuming all the necessary mitigating safeguards are in place, “the CFO should look to use that risk strategically to the company’s advantage.”

Mr. Kasner explained: “If it’s been decided that my company is going to have a greater risk tolerance, we may be willing to bring in certain types of customers that the competition might shy away from because they are viewed as too risky. On the flip side, if I have excellent controls around my risk, a customer might consider my company more secure, and decide to do business with me instead of my competitors.”

CFO Studio Business Development Partner Steve Peckman, a Vice President at Yorktel, an Eatontown, NJ–based provider of unified communications & collaboration, cloud, and video managed services, found Mr. Kasner’s take on the CFO as strategist enlightening. “As the only professional in the room who wasn’t a CFO, I was inspired to hear that the strategy and risk- management tactics laid out over the course of the evening correlated with the ways my team and I manage our business unit — as a microcosm of the larger company.”

Ultimately, it’s the CEO who has the vision for the direction of the company, “but the CFO should be contributing data about both the business and the market to help make accurate and strategic decisions,” Mr. Kasner pointed out.

“It’s our job,” he added, “to establish the framework for strategy and risk, and then use and contribute to that framework to help guide company strategy.”

They say “there’s always room for improvement,” and this holds true even in the case of successful businesses that begin and end every fiscal year in the black— large, brand-name companies among them. “While there are many tight ships in the sea, it’s not uncommon to find some finance departments working with nonstandard and manual processes and controls, coupled with suboptimal systems and tools,” according to Alison Cornell, a senior-level Financial Executive and experienced business leader.

Ms. Cornell spoke on “Driving Finance Transformation—Higher Performance, Better Intelligence, Greater Confidence” at an invitation-only dinner discussion attended by CFOs from New York–area world-class companies. The event was held recently at Maloney & Porcelli in New York City, and is part of CFO Studio’s Executive Dinner Series.

Calling on her time spent in the C-suite at several multibillion-dollar companies, Ms. Cornell developed a multifaceted finance transformation approach, and she shared its key points with dinner attendees.

The Long View

“Before you can transform a subpar working environment into a high-functioning financial engine, you need to envision what you want your future to look like,” said Ms. Cornell. She suggested executives direct their focus to the most rudimentary—yet crucial—processes and controls that make up the backbone of their finance departments.

“I’ve seen a broad array of processes in my career,” she said, “and they’ve ranged from those that were tight and automated to ones that were ill-defined, nonstandard, mostly manual, and local.” In the case of the latter, “you often find calculations performed outside the system in Excel spreadsheets, with many of the controls also manual,” and the associated systems and tools “suboptimal and incomplete.”

Ms. Cornell said this often adds up to an unnecessarily high level of resources and complexity “with each region, and sometimes country, having their own staff, process, and code set.”

As part of her transformation approach, Ms. Cornell recommends that processes be standardized, simplified, globalized, and automated. “Beyond that, these key processes should be performed by the fewest number of people in the fewest places,” she added. Controls should also be automated instead of manual, thereby leveraging system capability. “If the system can do it, why not have the system do it?” she asked attendees.

Ms. Cornell said such basic and fundamental changes would result in a “consolidated, de-layered, and lower-cost organizational structure.” Audit fees would go down and resources could be reduced or redeployed to more value-added work. “In the end, finance teams would have the freedom to spend more time on thoughtful and insightful analysis that’s based on drivers.” Plus, mechanizing processes and controls also takes a great deal of the potential for human error out of the equation, and “that’s a huge positive,” she said.

All Aboard

While Ms. Cornell’s formula for finance transformation made sense to dinner attendees, many wondered how to broach the subject in cases where management is resistant to change. She said deciding whom to involve in the buy-in process tends to be closely tied to the culture of the organization. “Is it a command-and-control culture, or is it more relationship-based?” she asked, pointing out that “processes usually adapt to whatever the culture is at the company.”

Either way, it became abundantly clear from the dinner conversation that “today’s CFOs are embracing finance transformation as a catalyst to drive change and add strategic value to their businesses,” noted CFO Studio Business Development Partner Chris Nyers, a Partner at CFGI, a finance and accounting consulting firm with offices in Boston, New York, and Philadelphia.

He said it also was clear that there is no “one-size-fits-all” model to create a more effective and cost-efficient finance function. “Whether it be through the standardization of processes across geographies, integration of systems, leveraging of shared services, or the elimination of inefficient, manually intensive processes, each organization seemed prepared to approach their challenges in a different and unique way.”

To that end, Ms. Cornell offered a recommendation: “Start with a clean sheet of paper, and build processes that are best-in-class, instead of trying to fix or tweak existing suboptimal processes.” She said this approach results in the need for people to “think and act differently,” which is the first step toward a true transformation, be it financial or otherwise.

AN INCENTIVE PLAN THAT REWARDS ALL EMPLOYEES IS PAIRED WITH BROAD TRANSPARENCY

Morale is high, people work hard and seem content, and every employee knows what’s going on behind the scenes at Kepner-Tregoe in Princeton, NJ. The multinational management consulting and training services firm implemented an incentive program as the market started to rebound after the global financial crisis of 2008 – 2009, and, at the same time, took the opportunity to offer employees greater transparency into its financial performance. As a result, “People are motivated in their roles, responsibilities, and decision-making; they’re educated about the business, and all that adds up to a sense of empowerment among the staff,” said Bill Baldwin, CFO and a Kepner-Tregoe Principal.

Mr. Baldwin spoke on “Driving Employee Performance and Engagement – Sharing Financial Intelligence and Insight” at an invitation-only dinner discussion attended by CFOs from New Jersey– area middle market companies. The event was held recently at Agricola Eatery in Princeton and is part of CFO Studio’s Executive Dinner Series.

Mr. Baldwin said the company instituted the incentive plan as a way of rewarding employees for their loyalty and sacrifice during a difficult time that, as at many organizations, included belt-tightening and cost-containment measures. And that naturally led to greater financial transparency. “It just seemed right to let people know if they’re on track to making their goals.”

A Pat on the Back

When the incentive program kicked off about seven years ago, every employee received a 10 percent bonus at the end of each quarter if the operating profit plan within their region was met. “This really registered with people,” said Mr. Baldwin. “It was motivation for them, and it changed their behavior in the business.”

While some incentive plans are based on revenue, “ours is centered around operating profit, and that has significantly altered the way employees view their decision-making when it comes to expenses,” said Mr. Baldwin. “They may reconsider the type of hotel they stay at, or choose a different beverage while dining or meeting with a client.” It’s up to the employee, he noted, “and that’s been empowering.”

These quarterly incentives are now team-based, he noted, since an annual incentive program has been adopted as well, to reward employees according to their individual performance record at the end of the year. “It’s all paid off because people take more ownership and accountability in the overall success of the business.”

Crystal-clear Reporting

With all employees striving to achieve personal and team-based incentives, “we thought it only fair to provide them with greater financial transparency” in an effort to eliminate what Mr. Baldwin called the “surprise factor.” He explained: “We don’t want to reach the end of a quarter or the year and have people surprised that the company or the region has not done as well as they might’ve thought.”

So for the past several years, Mr. Baldwin has been issuing a weekly report to all employees detailing the bookings for the current and next quarter, and comparing that number to the quarterly plan and forecast by region for the entire company.

The report also highlights anyone who has sold a new piece of business over a certain dollar amount in the past week. “When people see their name in lights, so to speak, they love it,” said Mr. Baldwin, who also calls or sends an email congratulating those high achievers. “That’s been very motivational, and great for morale.”

In addition to this weekly report, Mr. Baldwin and the CEO hold quarterly WebEx events (open to all employees) to provide an update on how the company is doing — both regionally and as a whole —what the future looks like, and how the incentives are shaping up. “We try to be as forward-looking as possible to give people an idea of what we expect the results to be for the year,” all in an effort to keep everyone informed from a strategic, operational, and financial standpoint.

“We are as open and honest as we can be with our messaging, and we’ve learned that it has to be repetitive and in terms to which people can connect.” To that end, employees are routinely educated on how to interpret the data contained in the reports, what the trends mean to them, and how the numbers are used by management. “We know we’ve been successful when folks start asking questions, and it becomes more of a two-way conversation. We’ve engaged them, and nobody has been kept in the dark,” said Mr. Baldwin.

Joseph Tammaro, Sector President at TD Bank, North America, and a CFO Studio Business Development Partner, pointed out that one of the biggest challenges in any organization is an “us vs. them” mentality. “It’s encouraging to hear the ultimate outcome of such transparency. A strong cultural foundation has been established, along with buy-in from the employee base who, as a result, will do what needs to be done to secure the viability of the company to move forward.”

Too Much of a Good Thing?

Overall, dinner attendees responded positively to Kepner-Tregoe’s methods, but a few questioned whether it was possible to be too transparent. Mr. Baldwin responded by acknowledging that there are, indeed, risks to transparency. “If a region is having a quarter where they don’t think they’ll make their results, but the next quarter is looking strong, we have to be careful that people don’t manage earnings from a soft quarter into a good quarter, or from one year into the next year.”

In addition, he said, there’s a fine line between being open and honest, and not creating anxiety or panic when business is not as good as usual. “We have to be very careful about our delivery because the last thing we want is people worrying about possible cost-containment actions or that their jobs may be cut.”

Mr. Baldwin believes the frequency of the messaging helps to quell any real fears. “We’ve been doing this for several years now, and people have matured in their thinking and do understand that there are cycles to any business and sometimes there are soft quarters.” And it doesn’t hurt, he added, that “in good quarters, every employee is recognized with a reward for a job well done.”